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Yes, that statement expired.
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Do you have written proof of the verbal acceptance of the lower loan amount? If you do not, I would err on the side of caution and send him the AA notice. But if you have documentation of the acceptance then I would consider it a withdrawal for purpose of Reg B.
A conditional approval means that a mortgage underwriter is mostly satisfied with the mortgage application. The lender is willing to approve the mortgage so long the pending conditions are met. However, it is not a guarantee the application will be approved. Instead, it means the lender is willing to loan a specific amount of money based on certain criteria. In your example, it would be an denial and not a NOI. The application approval requires certain actions to be taken, for example an appraisal. Since this requirement was not allowed or completed then the loan could never be fully approved, so it would be a denial. Other conditional approval requirements like changes in a financial situation, government regulations, property condition could all lead to a declined final loan.
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I’m of the opinion that you should follow what is written in the institution’s policy/procedures. I would also agree that you need to record the figure that was determined for the credit decision regardless of the errors, if your LAR hasn’t been filed. For any errors on prior year’s data or if a business decision is made to not update the corrected amount, you need to document those files with the reasoning for the difference. I would also recommend that you have documented training with the underwriters. Their miscalculations could provide risk to the institution not only for HMDA, but ATR, UDA(A)P and Fair Lending.
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Yes, you are required to report the loan on the LAR for the year you acquired it. All information for the reporting fields of a purchased transaction can be found in section 4(a) Data Format and Itemization for HMDA rules. In answer to your question you would report the data of the application and not the date of your purchase.
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Per Reg. Z section § 1026.9(c)(2)(iv)(D)(3) – Official Interpretation of When a Notice is not Required:
#8. Disclosure of annual percentage rates. If a rate disclosed pursuant to § 1026.9(c)(2)(v)(B) or (c)(2)(v)(D) is a variable rate, the creditor must disclose the fact that the rate may vary and how the rate is determined. For example, a creditor could state “After October 1, 2009, your APR will be 14.99%. This APR will vary with the market based on the Prime Rate.”At the time of the initial disclosure if you had used the model language and explained the rate was based on Prime, Wall street journal etc. you do not need to send them a notice an additional notice would not be needed.
Official interpretations go on to say:See interpretation of 9(c)(2)(v) Notice not Required in Supplement I
C) When the change is an increase in a variable annual percentage rate in accordance with a credit card or other account agreement that provides for changes in the rate according to operation of an index that is not under the control of the creditor and is available to the general public.
D) When the change is an increase in an annual percentage rate, a fee or charge required to be disclosed under § 1026.6(b)(2)(ii), (b)(2)(iii), (b)(2)(viii), (b)(2)(ix), (b)(2)(ix) or (b)(2)(xii), or the required minimum periodic payment due to the completion of a workout or temporary hardship arrangement by the consumer or the consumer’s failure to comply with the terms of such an arrangement, provided that:(1) The annual percentage rate or fee or charge applicable to a category of transactions or the required minimum periodic payment following any such increase does not exceed the rate or fee or charge or required minimum periodic payment that applied to that category of transactions prior to commencement of the arrangement or, if the rate that applied to a category of transactions prior to the commencement of the workout or temporary hardship arrangement was a variable rate, the rate following any such increase is a variable rate determined by the same formula (index and margin) that applied to the category of transactions prior to commencement of the workout or temporary hardship arrangement; and
(2) The creditor has provided the consumer, prior to the commencement of such arrangement, with a clear and conspicuous disclosure of the terms of the arrangement (including any increases due to such completion or failure). This disclosure must generally be provided in writing. However, a creditor may provide the disclosure of the terms of the arrangement orally by telephone, provided that the creditor mails or delivers a written disclosure of the terms of the arrangement to the consumer as soon as reasonably practicable after the oral disclosure is provided.
When the change is an increase in an annual percentage rate, a fee or charge required to be disclosed under § 1026.6(b)(2)(ii), (b)(2)(iii), (b)(2)(viii), (b)(2)(ix), (b)(2)(ix) or (b)(2)(xii), or the required minimum periodic payment due to the completion of a workout or temporary hardship arrangement by the consumer or the consumer’s failure to comply with the terms of such an arrangement, provided that:
(1) The annual percentage rate or fee or charge applicable to a category of transactions or the required minimum periodic payment following any such increase does not exceed the rate or fee or charge or required minimum periodic payment that applied to that category of transactions prior to commencement of the arrangement or, if the rate that applied to a category of transactions prior to the commencement of the workout or temporary hardship arrangement was a variable rate, the rate following any such increase is a variable rate determined by the same formula (index and margin) that applied to the category of transactions prior to commencement of the workout or temporary hardship arrangement; and
(2) The creditor has provided the consumer, prior to the commencement of such arrangement, with a clear and conspicuous disclosure of the terms of the arrangement (including any increases due to such completion or failure). This disclosure must generally be provided in writing. However, a creditor may provide the disclosure of the terms of the arrangement orally by telephone, provided that the creditor mails or delivers a written disclosure of the terms of the arrangement to the consumer as soon as reasonably practicable after the oral disclosure is provided.
Classification is not dependent on the amount being lower than requested by the borrower. Anytime you would change the request up or down it would be considered a counteroffer because it is not what they requested at the time of application.
specifically HMDA Comments for 1003.4 Paragraph 4(a)(6) 9. Action taken – Counteroffers states “If a financial institution makes a counteroffer to lend on terms different from the applicant’s initial request (for example, for a shorter loan maturity, with a different interest rate, or in a different amount)”
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To use a Private Policy the Regulation requires the following:
1. That the policy is issued by an insurance company that is:
• Licensed, admitted, or otherwise approved to engage in the business of insurance by the insurance regulator of the State or jurisdiction in which the property to be insured is located.
• Recognized, or not disapproved, as a surplus lines insurer by the insurance regulator of the State or jurisdiction in which the property to be insured is located in the case of a policy of difference in conditions,
multiple peril, all risk, or other blanket coverage insuring nonresidential commercial property.2. The Policy must also at minimum contain:
• Define the term ‘‘flood’ to include the events defined as a ‘‘flood’ in an SFIP.
• Contain the coverage specified in an SFIP, including that relating to building property coverage; personal property coverage, if purchased by the insured mortgagor(s); other coverages; and increased cost of
compliance coverage.
• Contain deductibles no higher than the specified maximum, and include similar non-applicability provisions, as under an SFIP, for any total policy coverage amount up to the maximum available under the NFIP at the
time the policy is provided to the lender.
• Provide coverage for direct physical loss caused by a flood and may only exclude other causes of loss that are excluded in an SFIP. Any exclusions other than those in an SFIP may pertain only to coverage that is in
addition to the amount and type of coverage that could be provided by an SFIP or have the effect of providing broader coverage to the policyholder; and
• Not contain conditions that narrow the coverage provided in an SFIP.
• A requirement for the insurer to give written notice 45 days before cancellation or non-renewal of flood insurance coverage to:
o The insured; and
o The financial institution that made the designated loan secured by the property covered by the flood insurance, or the servicer acting on its behalf.
• Information about the availability of flood insurance coverage under the NFIP.
• A mortgage interest clause similar to the clause contained in an SFIP; and
• A provision requiring an insured to file suit not later than one year after the date of a written denial of all or part of a claim under the policy; and3. The regulation also allows a Financial Institution to rely on the Compliance Aid Statement in the Policy if it is worded exactly as the regulation has it written.
If a Private Policy does not meet these standards then it will not meet the Regulation requirements for required flood coverage.
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According to the Regulation:
Tiered-rate accounts. Each interest rate, along with the corresponding annual percentage yield for each specified balance level (or range of annual percentage yields, if appropriate), must be disclosed for tiered-rate accounts. (See appendix A, Part I, Paragraph D.)
Examples of model forms for tiered accounts can be found here:https://www.consumerfinance.gov/rules-policy/regulations/1030/b/#43f4618ba52b0abdb36d110affd8f53a20adb8b5c739e8860093dc71
But reviewing the sample form it does appear you would be required to provided the minimum balance for each tier.
(iv) Tiered-Rate Accounts
Tiering Method A
• If your [daily balance/average daily balance] is $__ or more, the interest rate paid on the entire balance in your account will be __% with an annual percentage yield of __%.• If your [daily balance/average daily balance] is more than $__, but less than $__, the interest rate paid on the entire balance in your account will be __% with an annual percentage yield of __%.
• If your [daily balance/average daily balance] is $__ or less, the interest rate paid on the entire balance will be __% with an annual percentage yield of __%.
Tiering Method B
• An interest rate of __% will be paid only for that portion of your [daily balance/average daily balance] that is greater than $__. The annual percentage yield for this tier will range from __% to __%, depending on the balance in the account.• An interest rate of __% will be paid only for that portion of your [daily balance/average daily balance] that is greater than $__. The annual percentage yield for this tier will range from __% to __%, depending on the balance in the account.
• If your [daily balance/average daily balance] is $__ or less, the interest rate paid on the entire balance will be __% with an annual percentage yield of __%.
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There is no formal guidance on filtering. However, you must consider UDAAP, Fair Lending and Fair Banking when you utilize filters to narrow down marketing. For example using home value and income standards are a sure way to have a CRA and fair lending issue. Using Age (except for legal contract age), gender, and marital status are protected class categories which will cause fair lending and fair banking issues. In some cases using households with children could also cross the fair lending line.
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Based on the information provided it sounds like a purchase transaction. Not a refinance, based on the details its unclear as to why there would be a right of recission? As far as the LE/CD this is a difference between TRID and HMDA. TRID and HMDA have different purpose options and different purpose definitions, the same loan may have one purpose under HMDA but that same loan would have a completely different purpose under Regulation Z (and TRID). HMDA provides for four different purchase options: 1) purchase, 2) refinance or cash-out refinance, 3) home improvement, or 4) other. TRID provides for four slightly different purpose options: 1) purchase, 2) refinance, 3) construction, and 4) home equity loan. The LE/CD will need to align with TRID purposes:
TRID loan purpose can be defined as follows:
Purchase Loan Purpose. A purchase is defined as credit to finance the acquisition of the property that secures or will secure the transaction. Since bare land loans are subject to TRID, this means that a purchase loan will often include either a purchase of bare land or the purchase of a dwelling.
Refinance Loan Purpose. A refinance is defined as credit that will be used to refinance an existing obligation that is secured by the property that secures or will secure the transaction. A refinancing is a new transaction requiring new disclosures to the consumer and occurs when an existing obligation that was subject to Regulation Z is satisfied and replaced by a new obligation undertaken by the same consumer.
Construction Loan Purpose. A construction purposes is one where the credit will be used to finance the initial construction of a dwelling (not renovations to an existing dwelling) on a property that secures or will secure the loan. TRID Loan Purpose Hierarchy, a construction loan purpose will only be used when an applicant already owns the land they are building on and they are not refinancing that land with the construction loan.
Home Equity Loan Purpose. A home equity loan is a credit that is not a purchase, refinance, or construction loan. These loans are often debt consolidation loans, second mortgages (new money), or other loans where an applicant owns a home free and clear.
The TRID loan purpose waterfall (hierarchy) is as follows: One, purchase; two, refinance; three, construction; and four, home equity loan. When determining which purpose to disclose, a creditor must look at the waterfall of four possible purposes in the order that they appear in Section 1026.37(a)(9) of Regulation Z and select the first one that applies to the loan.
To illustrate use of the waterfall, if the loan meets the definition of purchase because the consumer intends to use the credit to purchase the property that will secure the loan, the creditor must disclose the purpose as purchase even if the loan also meets any other definitions appearing later in the waterfall. A creditor must disclose the purpose as refinance if the consumer intends to use the credit to construct a dwelling on real property that the consumer already owns and to satisfy an existing loan secured by that real property. If the credit will be used to finance the initial construction of a dwelling on the property and will not be used for any purchase or refinance purpose, the creditor must disclose the purpose as construction. Even if the loan is secured by real property being purchased and disclosed as a purchase on the Loan Estimate, if the loan is also financing the construction of a dwelling, the provisions of Section 1026.17(c)(6)(ii) still apply. So the loan’s purpose as disclosed on the Loan Estimate does not impact the applicability of other construction-specific provisions of Regulation Z.”
Based on the waterfall example provided by the CFPB your LE/CD will need to align with those requirements. Since you asked about a right of recission I’m assuming some of the land still has a loan?
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It sounds as if you are placing a building on property in a SFHA. Flood insurance does not just apply to residential structures. So using a detached structure exemption may not apply here. Just because it is not a residence will not exempt it from flood requirements. There are specific standards in the Flood FAQs from may of 2022 that need to be followed to use the detached building exemption. Not knowing enough about the transaction leads me with the following thoughts –
Couple of things need to be considered:
1. What is the primary purpose of the shop?
2. Are either parties trying to circumvent the regulation of requiring flood insurance?
3. if there was a flood would this cause harm to the borrower and/or the institution?NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646 and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
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This question is best answered by your FIs attorney. IMO, anytime restitution/rate change is being discussed you would want a legal opinion to ensure both the FI and Customer are properly covered and protected.
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There has been no guidance on what is “an acceptable level”. The only information that has been mentioned has been in enforcement actions where it was cited as having been a significant portion of an institutions fee income collected. Using the word significant is a subjective term without defining it for the industry, but unfortunately it hasn’t been. Do you belong or have a compliance networking group that you could pose this question to? They maybe able to provide some guidance if they have had conversations about this with their regulator. If you have a good relationship with your EIC you could also pose this question to them and see if they could provide guidance as well.
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In general, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires creditors to provide to applicants free copies of all appraisals and other written valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling, and require creditors to notify applicants in writing that copies of appraisals will be provided to them promptly.
In most cases the purpose of appraisal is to determine the fair market value of the property, while an inspection determines the condition of the home and identifies any items in need of repair.
In the case of a new build the inspection would be to determine if everything was completed on the property. In some cases, especially, in the Midwest you will see property inspections come back requiring an escrow account to be created for the sod on winter builds. They will still value the property like the appraisal it just indicates there are still minor things needing to be completed. If your inspection is for this purpose than it would be excluded from disclosure requirements.
If the valuation were to change a homes value then yes it would be considered a disclosure event and would follow the appraisal requirements in Reg. B.
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